• Just 22 per cent of money raised from NHS property sales went back into capital budget for reinvestment
  • This was despite government commitment for disposal proceeds to be reinvested in new estates’ projects
  • Accounting treatment exacerbates current squeeze on NHS capital funding

Less than a quarter of the money raised from NHS property sales last year went back into the capital budget for reinvestment in the estate, according to provider accounts.

Consolidated accounts show £343m (78 per cent) of the income raised through asset disposals in 2018-19 was instead diverted into day-to-day revenue spending.

This was despite a government commitment for disposal proceeds to be reinvested into new estates’ projects.

This accounting treatment of the receipts exacerbates the current squeeze on NHS capital funding, by compromising the government’s plan to raise an additional £700m per year from land sales towards new projects.

The proportion of disposal income diverted to revenue budgets has steadily increased in recent years, as trusts have sought to boost their performance against their financial control total targets. NHS Improvement in January banned trusts from doing this.

As previously revealed by HSJan increasingly used accounting “wheeze” around land valuations – encouraged by NHS Improvement and within DHSC rules – appears to have enabled trusts to use higher proportions of land sale proceeds to boost their revenue performance.

The proportions nationally have increased from 20 per cent in 2015-16, to 36 per cent in 2016-17, 50 per cent in 2017-18, to 78 per cent in 2018-19.

Accounting treatment of land sale income

It comes amid a spiralling backlog of overdue maintenance work, with squeezed capital budgets also continuing to be raided to prop up revenue spending.

Local health leaders have also been frustrated by the delays they have faced in getting new infrastructure projects signed off, which they suspect is due to the overall squeeze, while leaders at NHS England have begun publicly calling for a significant increase in capital investment.

In its response to Sir Robert Naylor’s review of NHS estates, the Department of Health and Social Care said trusts would be penalised if they failed to maximise their disposal of surplus assets. It also said providers would be allowed to keep the proceeds from sales “on condition that they are reinvested in the NHS estate to deliver local priorities and sustainability and transformation partnership strategies”.

The accounts show dozens of trusts have kept the proceeds, but the benefit has been scored in their revenue performance as opposed to boosting capital budgets.

For trusts in deficit, the cash will typically have been spent on the day-to-day running of services. For trusts in surplus, the cash proceeds will be held in reserve with the potential to be spent on infrastructure projects.

But because the benefit has been accounted for within the revenue budget at a national level, there is no increase to the capital budget. Therefore, although some trusts will have cash available to spend, their freedom to do so will be constrained by the national capital spending limit (as all capital spending by trusts scores within this).

In 2019-20, the capital spending limit for NHS providers has increased marginally, but due to significant pent up demand for spending, providers plans would breach the limit by 20 per cent. NHS England and NHS Improvement have told local leaders to work together to reduce their planned spending.

The DHSC has said it has committed £3.9bn of “new” capital funding by 2022-23. However, there has yet to be any significant increase to the NHS provider sector’s capital spending limit. Nor has there been a significant rise in land sale receipts, while the private finance initiative has been abolished.

The department said proposals from the NHS would be considered in the spending review, which was due to happen later this year but has been delayed.

NHSI was also contacted for comment.